A. Copeland v. Hewlett-Packard Co., 15-16688

Background

Shareholder derivative suit arose from HP’s failed acquisition of Autonomy; plaintiffs sought relief on behalf of HP for alleged fiduciary breaches related to the deal.
Parties negotiated a settlement that provided no monetary relief to shareholders but implemented detailed corporate governance reforms governing future M&A and gave shareholders enforcement rights.
District court conducted a lengthy fairness hearing, considered settlement negotiations (mediated by retired Judge Vaughn Walker), and found no fraud or collusion; it rejected two prior settlements before approving this one.
Court found plaintiffs faced significant litigation obstacles under Delaware law (demand futility doctrine and business-judgment rule), given extensive HP due diligence and the composition of HP’s board and advisors.
The district court concluded the governance reforms were causally related to the litigation, had real value to HP and its shareholders, and that notice and objection procedures were adequate.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Fairness of settlement with only nonmonetary relief	Settlement inadequate because no cash to shareholders; reforms of uncertain value	Settlement reasonable given litigation risks and potential corporate-wide governance benefits	Approved: court did not abuse discretion; reforms provided actual value and were causally related to litigation
Demand futility / strength of claim	Objectors (Steinberg, Copeland) argued stronger claims (some issued demand letters) so settlement undervalues claims	HP argued plaintiffs faced high hurdles under Delaware business-judgment rule and demand futility standards	Held: district court reasonably found plaintiffs’ claims weak and settlement favored given litigation risk
Scope of release (who released)	Objectors challenged broad releases covering many defendants	HP and proponents argued broad release appropriate to settle derivative claims	Held: scope acceptable; objections unpersuasive and no controlling circuit rule limiting releases to contributors
Collusion in negotiation	Objectors claimed negotiations were collusive and demanded further discovery	HP and mediator testified negotiations were extensive, adversarial, and non-collusive	Held: court found no evidence of fraud/collusion; limited discovery denial proper absent other evidence
Adequacy of notice	Objectors argued notice methods (publication, SEC filing, website) were insufficient compared to direct mail	HP argued publication and SEC filing were best practicable under circumstances	Held: notice adequate under Rule 23.1; publication + SEC filing + website met due process here
Sealing and fee award to third parties	Objectors challenged sealing of some materials and claimed Cook merited fees for influencing settlement	HP sought sealing for privileged/confidential materials; court denied Cook’s fee claim	Held: sealing rulings justified by compelling reasons; no fees awarded to Cook (court found he did not influence order)

Key Cases Cited

In re Pac. Enters. Sec. Litig., 47 F.3d 373 (9th Cir.) (standard for reviewing fairness of complex settlements)
Class Plaintiffs v. City of Seattle, 955 F.2d 1268 (9th Cir.) (factors for evaluating settlements)
Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (demand futility and business-judgment framework in derivative suits)
Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir.) (scrutiny for nonmonetary settlement provisions)
Polk v. Good, 507 A.2d 531 (Del. 1986) (derivative suits: corporate benefits can constitute consideration)
Alaska Elec. Pension Fund v. Brown, 941 A.2d 1011 (Del. 2007) (presumption of causal link between suit and enacted reforms)
Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172 (9th Cir.) (standards for sealing judicial records)
Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (U.S. 1950) (due-process principles for notice; practicability standard)